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S&P 500 CAPE & P/E Ratios by Sector 1979 – 2017

The table below lists the current & historical CAPE ratios by GICS sector of S&P 500 companies. If the Shiller PE ratio of a sector is considerably lower than its historical average, this might indicate that the sector is currently undervalued and vice versa. The overall CAPE of the index as a whole is currently 33.53(Jan 11th 2018). Note: Real Estate sector is combined with Financials sector.

For the latest figures & full historical data, check the valuation datasets by Siblis Research.

[S&P 500] CAPE (Shiller PE) Ratios by Sector

Sector

6/30/2017

3/31/2017

12/31/2016

6/30/2016

12/31/2015

6/30/2015

12/31/2014

6/30/2014

12/31/2013

Consumer Disc.

37.71

37.70

35.16

34.94

37.45

40.47

41.74

39.97

43.22

Consumer Stap.

25.52

25.25

24.64

27.30

24.85

23.87

23.45

21.66

21.96

Energy

18.14

17.91

18.06

13.82

10.35

11.69

11.95

13.75

13.01

Financials

23.79

23.18

23.53

19.58

21.76

21.92

23.26

21.54

21.61

Health Care

26.53

25.67

24.26

27.16

28.63

30.54

29.06

26.47

25.06

Industrials

21.87

20.55

19.64

18.64

18.94

19.38

20.89

20.27

20.87

Inf. Tech.

32.61

32.75

30.10

27.87

29.91

30.86

34.32

33.11

34.13

Materials

32.31

31.47

29.84

26.37

24.48

25.89

26.88

27.59

26.61

Telecoms

38.64

43.69

38.38

43.01

39.57

38.00

33.54

45.12

38.44

Utilities

26.06

25.70

24.35

25.39

21.13

20.14

23.57

22.09

19.65

Need the latest data? Purchase sector and industry specific P/B, P/E, FCF Yield, EV/EBITDA and CAPE ratios for the last day of each month since 12/31/1979 and do your own valuation analysis.

Need the full raw data? Purchase S&P 500 Sector Valuation Reseacher Dataset by Siblis Research that includes all the formulas and data used to calculate the P/E and CAPE ratios, including quarterly earnings, outstanding shares, share prices, market caps, enterprise values, EBITDAs and historical sector classifications of all current & past index components since 3/31/1979. Check a sample file from here.

A clear negative correlation exists between the CAPE ratio of Consumer Staples sector and the sector performance. The forward return means the rate of return during the period of three years from the point of investment.

How are the sector specific Shiller PE ratios calculated?

Below is a short summary how the values are calculated. Examine the researcher dataset with full raw data to see the actual formulas that have been used.

Collect quarterly earnings, outstanding shares and share prices of all current & past S&P 500 companies for the required period.

Calculate the quarterly earnings of all companies (part of the index during a specific period) representing a specific sector. Adjust the earnings if the number of companies representing the sector has changed between quarters.

Calculating the sector specific ratios require some extra adjustments because the amount of companies belonging to a specific sector keeps changing. For example, the financials crisis of 2008 decreased the number of financial companies part of the index from 96 to 87.

Calculating the ratio requires accurate information how the S&P 500 companies have been changing in the past (examine the previous index components from here). The earnings of one quarter are collected from the components part of the index at the end of each quarter and not from a fixed group of companies. Using only the current index components does not give the full picture of historical valuations.

Valuations in March 2016

Based on the CAPE ratios, six of the ten sectors are valued higher than their historical averages. Based on the historical earnings, Financials, Health Care, Materials, Consumer Discretionary, Telecommunications and Utilities are valued higher and Industrials, IT, Consumer Staples and Energy are valued lower than their average valuations.

Especially the energy companies are currently looking very cheap if only looking at current CAPE value. The cheap oil price is causing investors to be aware of this sector and future earnings are expected to be considerable lower than before. Energy companies have been generated heavy losses during 2015 and shares have been plummeting. But the cheap oil will not last forever and it might be that now is a good time to start adding more energy companies to your portfolio. Also IT firms have not seen this low valuation levels in over 20 years. However, it is important to remember that the average PE for Information Technology also includes the sky-high stock prices during the dot-com boom of 1999-2000.

Shiller PE and sector performance

Can the CAPE ratio be used to indicate what will be the long term performance of a specific sector? In a white paper published by Barclay’s research department and Professor Shiller (to promote the new ETN/Exchange Traded Note created by the bank), the group developed a sector rotation strategy that outperformed annual returns of S&P 500 total return index with nearly 4%. The returns are indeed impressive but it is always easy to beat the market using historical data. Time will tell if the CAPE ratio remains a useful indicator.

Comparing the valuations of different sectors using CAPE

The CAPE ratios varies substantially between the sectors. In December 2015, consumer discretionary segment’s PE 10 ratio was three times higher than the ratio of energy companies. Does this mean that consumer discretionary companies are seriously overvalued?

Comparing the valuations of different industries is tricky. Investors have different expectation for the timeframe of future earnings of different companies. For some new and hot high-tech firm, most of the company’s value is based on hopes of fast growth and the current earnings of the company do not really matter. But for mature firms, the retained earnings in short timeframe are much more important. The same holds true for the whole sectors: expectations of when the money is coming in are not the same.

However, someone might raise the point that the average 10-year price-earnings of IT companies has been higher than the P/E of energy firms and utilities all the time for the past 30 years. This raises the question if the hopes of the investors have been constantly too high for some industries.

Some sectors traditionally viewed as cyclical, like consumer discretionary and IT, have higher average CAPE than defensive like utilities and consumer staples. But the average Shiller price-earnings ratios of consumer staples (defensive), health care (defensive), materials (cyclical) and industrials (cyclical) are very close to each other.

Global Industry Classification Standard (GICS)

GICS industry taxonomy is used to assign a company into one of the ten sectors based on the company’s principal business activity. The taxonomy system has also 24 industry groups, for example Industrials is divided into Capital Goods, Commercial & Professional Services and Transportation.

The system does not have a class for conglomerates. The most famous of conglomerate, Warren Buffet’s Berkshire Hathaway, is currently assigned to Financials.

S&P Dow Jones Indices and MSCI, companies that are maintaining the classification system, have announced that Real Estate will be created as a new sector, making the total number of main classes to be 11. Real Estate is currently part of Financials. The change will take effect on August 31, 2016.